QUESTION 1 Rico is an owner of a collectibles shop such as action figures and comic displays. There are a lot of collectors buying from his shop relative to the number of collectibles delivered by his supplier. Rico then decides to price discriminate to take advantage of this situation. Which of the following statements is true? O Rico cannot price discriminate because his customers are all similar in traits (e.g. economic background, knowledge, etc.) (O Rico should price discriminate since arbitrage opportunities are not possible. O Rico does not have any pricing power. (O Rico may find it difficult to price discriminate as his customers would find it easy to resell his products at a lower price. (O None of the above are true. QUESTION 4 Two political candidates are campaigning in an election to become prime minister. Each candidate needs to adopt one of three political stategies in order to appeal to voters (Left-wing, Centrist, or Right-wing). The payoff matrix below indicates how many votes each candidate will receive (in millions) depending on the strategies chosen. What strategy will be chosen by Candidate 2 if Candidate 1 publicly announces that they will be adopting a right-wing political strategy? | | Enter L for Left-wing, C for Centrist or R for Right-wing. Candidate 2 Left-wing (L) Centrist (C) Right-wing (R) Left-wing (L) 2,2 1,3 1.252.75 Candidate 1 Centrist (C) 3,1 2,2 15,25 Right-wing (R) 2.75.1.75 2515 2,2 QUESTION 2 ChowDag provides restaurant to door food delivery services in Brisbane. Generally, the fee per delivery is a fixed amount. However, when demand is far greater than supply, the fees per delivery \"surge\" (rise rapidly), encouraging more delivery drivers onto the road to deliver for ChowDog. Which of the following statements are true: [J The fee surge is an example of third degree price discrimination. [J The fee surge is an example of peak load pricing. [J With the fee surge, delivery drivers with expensive cars are more likely to drive. [0 The fee surge will not see the quantity of food delivery services increase. QUESTION Jeremy runs a very large industrial refining facility where he transforms crude oil into usable products such as gasoline, jet fuel, and kerosene. Isaac runs a salmon farm downstream from Jeremy's refinery. Currently, Jeremy dumps the waste product from his refinery directly into the river where Isaac's salmon are kept. This pollution causes several problems for Isaac's salmon, including mutations that result in some of his fish becoming deformed. Unfortunately for Isaac, he is unable to sell deformed fish, and therefore wishes to come to an agreement with Jeremy to stop him from polluting the river. Their respective benefits are shown below: _ No Pollution Controls Pol\\utlon Controls Gains to Jeremy () 1000 Gains to Isaac ($) 200 Total ($) 1200 If negotiation costs are $72 what is the maximum amount of money that Isaac could offer Jeremy to introduce pollution controls on his refinery and still be better off by $17? Answer to the nearest whole number in dollars (with no decimal places, $ sign, spaces or commas). QUESTION 7 A nature restoration company is currently working on a project which is improving the health of the Great Barrier Reef. The project is estimated to cost $3.1 billion. Aside fram improving the health of the reef, it is expected that the project will have positive impacts on Queensland's tourism, the state and Australian economy. The restoration company is suggesting that part of the cost should be covered by the tourism operators who benefit from the improved health of the reef. Which of the following statements are true: (7] If the marginal value of the healthier reef to the tourism operators, is greater than how much the restoration company wishes to charge them, an agreement with tourism operators to pay part of the cost may be possible. () If the negotiation fees become too high, reducing the benefits of the healthier reef to tourism operators, an agreement for tourism operators to cover some of the cost would most likely not be reached. (1) If tourism operators are able to avoid paying for any restoration costs, either directly or indirectly, it will maximise their surplus (assuming the restoration still goes ahead). [ With thousands of potential tourism operators and the likely involvement of expensive lawyers, Coase's theorem will likely help those involved reach an efficient outcome. QUESTION 3 Nissun and Horden are Australia's two largest car brands by sales volume. Recently, they have faced new, international competition, such as the Japanese Toyoto brand. Toyoto specialises in selling discounted cars to Australian businesses if they purchase them in large quantities. Select the item from the list provided to make the following statements true. . first degree price discrimination . second degree price discrimination . third degree price discrimination -~ When compared to Nissun and Horden, Toyoto could be argued to be engaging in . -~ IfNissun and Horden both decided to choose a strategy that results in significant losses for both of them, they are likely facing a _ peak load pricing -~ For statement 2 above, if Nissun and Horden follow this strategy resulting in significant losses for both of them, it would have resulted in them both playing their strategy. . arbitrage 1 2 3 4 5. pricing power 6 7. inefficient 8. convict's dilemma g. dominant 10.dominated 11. prisoner's dilemma 12. efficient QUESTION 8 Lydia loves mangoes and she decided to plant a mango tree in her backyard. Her tree is very healthy and bears a lot of fruits in late March every year. This attracts a lot birds which makes a lot of noise every time they are there. Lydia values her tree at $300. Bernice is Lydia's neighbour and she finds the birds really annoying. Assume that they are only neighbours of each other and no one else stays near them. Select the item from the list provided to make the following statements true. -~ The birds that are attracted by Lydia's mango tree is an example of a for Bernice .~ Bemice expressed her issues to Lydia and they both decided to negotiate. Assuming Coase Theorem holds, there might be 1 2 3 4 -~ If Bemice is willing to pay Lydia up to $700 for her to cut down the 5 mango tree, Lyida will . . 7 8 9. . positive internality . stop negotiations . an inefficient outcome . not cut down the tree . negative internality . hegative externality . ho outcome . an efficient outcome positive externality 10. plant anather tree 11.cut down the tree 12.an unhappy outcome QUESTION 10 Plastic bags take up to 1000 years to decompose in landfills, and end up in oceans where they are highly hazardous to marine life. The Australian Government is aiming to reduce Australia's plastic waste to 30% below 2020 waste levels by 2030. Reforms A A 8 Je o | Plastic waste change (compared to 2020 levels) by | 10% increase 30% reduction 50% reduction 2030. Total cost for industries to introduce reform 0.3 1.2 1.5 measures (billions of dollars) a. One possible solution to reduce plastic waste would be to make the marginal private cost of plastic waste more closely reflect the marginal social cost. This would be achieved by the Govemment' | Type T for increasing company Tax, P for increasing Personal tax, W for introducing a tax on plastic waste or B for Building more landfill stations. b. Imagine the Government decided to implement a system using market based instruments to price plastic waste. Firms would have to buy the right to produce plastic waste that exceeded levels in 2020. What is the minimum total cost of introducing the instruments to reduce plastic waste to achieve the goal (in billions of dollars to one decimal place)? S{ ' billion. c. If the Government decided to force firms to shut down if they exceeded their plastic waste limits, would this be efficient? ' '. Type Y for Yes or N for No. ' ' QUESTION 6 John runs a swimming school. He has a lot of students but only 10 car parking spaces for the student's parents. Often, the parents use the car parks designated for visitors of the library, which is located next door to the pool. 1. John's swimming school does not produce any negative externality 2. For a socially efficient outcome, John needs to pay for more parking spaces near his pool. 3. The Coase Theorem is a method that could be used to deal with the externality. Which of the above statements are true: O Only 1is true. O Only 2is true. (O Both 1 and 2 are true. (O Both 2 and 3 are true. O All three are true. QUESTION 5 Appla and Sunsung are 2 of the biggest phone manufacturers in the world. They hold a large market share in selling smartphones. With their market share, they are able to influence the prices of smartphones. Answer the following questions: a. Appla and Sunsung noticed sales for smartphones are higher when they are newly launched. They decided to sell their smartphones at a higher price during the first 8 months when the smartphones are being launched. This is an example of" ' price discrimination. Type F for First Degree, S for Second Degree, T for Third Degree or P for Peak Load Pricing. S b. Assume the new 6G technology has arrived. Appla and Sunsung are deciding whether to launch a new 6G smartphone to the market. Appla's decision will be affected by Sunsung and vice versa. The payoff values (in millions of dollars) below represent the expected first-year economic profits from each strategy. What will be the resulting first-year payoff be for Appla (the left player) after playing the game if Sunsung is the top row player? $' . Answer in millions of dollars (i.e. a value shown in the table, with no decimal places, $ sign, spaces or commas). ) ) Launch Does not launch Launch 25,-30 40, 10 Does not launch Q0,50 15,10 c. What is the dominant strategy forAppIa'?" | Type L for Launch, X for Does not launch or N for No dominant strategy. d. What is the dominant strategy for Sunsung? | | Type L for Launch, X for Does not launch or N for No dominant strategy